No fundamental shift of policy at the Bundesbank

Last week, the Chief economist at the Deutsche Bundesbank, Dr. Jens Ulbrich gave a rather extraordinary interview to the German magazine Der Spiegel. The interview was recorded in the article – Breaking a German Taboo: Bundesbank Prepared to Accept Higher Inflation. The sub-heading said that this marks a “major shift away from the Bundesbank’s hardline approach on price stability” and my profession apparently “hailed the decision as a ‘breakthrough’”. I wouldn’t be so sure. The Bank has a long track record of ignoring the plight of German workers and the workers elsewhere in Europe. The imposition of its ‘culture’ with its disdainful disregard for responsible economic policy on Eurozone political elites has created so much slack in Europe that even it cannot deny the mounting evidence that there is a deflationary problem. But this support for workers’ wage rises won’t last. As soon as the inflation rate exhibits the first uptick – the Bundesbank will be out there berating all and sundry about the dangers of profligacy! Leopards don’t change their spots.
Read the rest of this entry »

Spread the word ...
    Posted in Euro book | 5 Comments

    UK growth not all that it seems

    The British Office of National Statistics published the – Gross Domestic Product Preliminary Estimate, Q2 2014 – last Friday (July 25, 2014), which showed that real GDP growth was 0.8 per cent in the second-quarter building on the same result in the first-quarter. It is also the first quarter than the British economy has reached the peak value in March 2008 some 6 years and 1 quarter to get back to square one. On the surface it is a reasonable result but focusing on the headline figure misses some of the salient points that the British government certainly doesn’t want to advertise. The following blog provides some other perspectives some pointing out the deficiencies in just focusing on the headline GDP figure and others looking at other measures. Overall, what growth there is in the UK appears on the surface to being hijacked by high income earners and corporations.
    Read the rest of this entry »

    Spread the word ...
      Posted in UK Economy | 3 Comments

      Saturday Quiz – July 26, 2014 – answers and discussion

      Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
      Read the rest of this entry »

      Spread the word ...
        Posted in Saturday quiz | 1 Comment

        Saturday Quiz – July 26, 2014

        Welcome to the Billy Blog Saturday Quiz. The quiz tests whether you have been paying attention over the last seven days. See how you go with the following questions. Your results are only known to you and no records are retained.
        Read the rest of this entry »

        Spread the word ...
          Posted in Saturday quiz | Leave a comment

          Friday lay day

          Its my Friday blog lay day which today means a short blog day. I am finalising the manuscript for my Europe book. I have a complete edited version now (348 pages) and am now checking all referencing etc. It will be sent to the publisher next week and I will breath a sigh of relief. Anyway, as a followup to yesterday’s blog – When you’ve got friends like this – Part 11 – the Guardian carried an article written by the Shadow UK Chancellor Ed Balls today (July 25, 2014) – Conservative complacency won’t help working people. It outlines a radical economic plan. Anticipation nearly got the better of me …
          Read the rest of this entry »

          Spread the word ...
            Posted in Friday | 4 Comments

            When you’ve got friends like this – Part 11

            I received two E-mails yesterday informing me that at the upcoming NSW State Labor Conference (this weekend) the delegates would be asked to vote for the inclusion of a Federal Job Guarantee, along the lines that I have been working on since 1978 (more or less), in Labor Party policy. For readers abroad, the Labor Party is the major federal opposition party at present having lost government in 2013. It began life as the political arm of the trade union movement. Anyway, that was a pleasing development I thought. A little later, I received an E-mail and a follow up telephone call telling me that the same conference, the delegates would be asked to vote on a motion put forward by the Australian Manufacturing Workers’ Union, which is the strongest ‘left-wing’ union in Australia, that says that the ALP “should be focused on maintaining government solvency” and maintaining “low and stable Deficit to GDP ratios” and ensure the “tax base is adequate to fund Labor’s priorities”. Then I read a news report from the UK from earlier in the year about the Labour Party’s commitment in the upcoming election to shore up its “fiscal credibility” by eliminating the fiscal deficit with the leader Ed Miliband claiming that “When we come to office … there won’t be lots of real money to spend, things will be difficult”. Bloody hell! This is progressive politics – neo-liberal Groupthink style. At least there are a few truly progressive people who see that a federal Job Guarantee is the way forward as a first step.
            Read the rest of this entry »

            Spread the word ...
              Posted in Friends like this, UK Economy | 19 Comments

              Inflation rises on back of health fund price hikes – generally benign

              The Australian Bureau of Statistics released the Consumer Price Index, Australia data for the June-2014 quarter today. The quarterly inflation rate was 0.6 per cent and this translated into an annual rate of 3 per cent, up on 2.9 per cent in the March-quarter 2014. The Reserve Bank of Australia’s preferred core inflation measures – the Weighted Median and Trimmed Mean – are still well within the inflation targetting range and are not trending up. Various measures of inflationary expectations is also flat, including the longer-term, market-based forecasts. This suggests that the RBA will probably consider the inflation outlook to be benign and they will probably hold interest rates at their current low level. The evidence is suggesting that the economy is still very sluggish. The benign inflation outlook provides plenty of room for further fiscal stimulus.
              Read the rest of this entry »

              Spread the word ...
                Posted in Inflation | 1 Comment

                Decomposing the decline in the US participation rate for ageing

                Labour force participation rates are falling around the world signalling the slack employment growth that has accompanied the aftermath of the Global Financial Crisis. It is clear that many workers are opting to stop searching for work while there are not enough jobs to go around. As a result, national statistics offices classify these workers as not being in the labour force, which had had the effect of attenuating the official estimates of unemployment and unemployment rates. These discouraged workers are considered to be hidden unemployment. But the participation rates are also influenced by compositional shifts (changing shares) of the different demographic age groups in the working age population. In most nations, the population is shifting towards older workers who have lower participation rates. Thus some of the decline in the total participation rate could simply being an averaging issue – more workers are the average who have a lower participation rate. This blog investigates that issue for the US after noting yesterday that there has been a massive decline in the participation over the course of the downturn there. But we also note that the aggregate participation rate has been in decline since the beginning of this century so there is probably more than cyclical events implicated.
                Read the rest of this entry »

                Spread the word ...
                  Posted in US economy | 10 Comments

                  US labour market improving but it is not all good

                  Last week (July 3, 2013), the – US Bureau of Labor Statistics – released their latest – Employment Situation –June 2014 – which showed that in seasonally adjusted terms, total payroll employment increased by 288,000 in June while the Household Labour Force Survey data showed that employment rose by 407 thousand. The essence to be extracted from the data is that total employment in the US is now outpacing the underlying population growth by a considerable margin and the official unemployment rate is dropping quickly (from 6.3 per cent in May to 6.1 per cent in June). Over the last year, the official unemployment rate dropped by 1.5 percentage points. There has been an acceleration in employment growth in the last 6 months. But the unemployment rate has benefited not only from stronger employment growth but also from a continued decline in the labour force participation rate. As a result the labour force shrunk has fallen by 128 thousand people over the last year. There is also evidence that a significant proportion of the jobs created are in low pay, precarious areas of the labour market.
                  Read the rest of this entry »

                  Spread the word ...
                    Posted in US economy | 2 Comments

                    Saturday Quiz – July 19, 2014 – answers and discussion

                    Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.
                    Read the rest of this entry »

                    Spread the word ...
                      Posted in Saturday quiz | 3 Comments